United States Coast Guard
Implementation of the Inflation Adjustment Act Gao ID: GAO-03-221R November 1, 2002Earlier this year, GAO began a governmentwide review of the implementation of the Federal Civil Penalties Inflation Adjustment Act of 1990. The act requires each federal agency to issue a regulation adjusting its covered maximum and minimum civil monetary penalties for inflation by October 23, 1996, and requires them to make necessary adjustments at least once every 4 years thereafter. During the review, GAO determined that the United States Coast Guard published its first round of penalty adjustments in 1997, but has not published a second round of adjustment for 56 eligible penalties.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-221R, United States Coast Guard: Implementation of the Inflation Adjustment Act
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United States Government Accountability Office:
Washington, DC 20548:
November 1, 2002:
The Honorable Norman Y. Mineta:
The Secretary of Transportation:
Subject: United States Coast Guard: Implementation of the Inflation
Adjustment Act Dear Mr. Secretary:
Earlier this year, we initiated a governmentwide review of the
implementation of the Federal Civil Penalties Inflation Adjustment Act
of 1990, as amended (Inflation Adjustment Act).[Footnote 1] The
Inflation Adjustment Act required each federal agency to issue a
regulation adjusting its covered maximum and minimum civil monetary
penalties for inflation by October 23, 1996, and requires them to make
necessary adjustments at least once every 4 years thereafter. During
our review, we determined that the United States Coast Guard published
its first round of penalty adjustments in 1997, but has not published a
second round of adjustments for 56 eligible penalties. This report is
intended to bring this matter to your attention and to recommend
corrective action.
The Coast Guard Has Not Published a Second Round of Adjustments for
Eligible Penalties:
Under the Inflation Adjustment Act, the Coast Guard (like other covered
federal agencies) was required to publish a regulation by October 23,
1996, adjusting its maximum civil penalties for inflation. The act
requires those inflation adjustments to be based on changes in the
Consumer Price Index (CPI) from June of the calendar year in which the
penalties were last set or adjusted through June of the year prior to
the adjustment. The statute also includes precise rules for rounding
penalty increases. For example, the statute provides that penalty
increases must be rounded to the nearest ’multiple of $1,000 in the
case of penalties greater than $1,000 but less than or equal to
$10,000.“ The statute limited the first adjustments of an agency‘s
penalties to 10 percent of the penalty amounts. It also requires
agencies to examine their penalties at least once every 4 years and, if
necessary, make additional inflation adjustments.
On April 8, 1997, the Coast Guard published a final rule making its
first penalty adjustments under the Inflation Adjustment Act.[Footnote
2] The agency subsequently published two rule corrections to address
’errors which may prove to be misleading and are in need of correction
or clarification,“ with the final publication taking effect on July 1,
1997.[Footnote 3] In the last rule, the agency identified 127 covered
civil penalties and adjusted 122 of them for inflation.[Footnote 4] As
table 1 shows, the 122 penalties after the 1997 adjustments were at 16
different penalty amounts ranging from $22 to $137,500. The table also
shows that the amount of inflation needed to trigger another penalty
increase ranges from 3.6 percent to 45.5 percent, depending on the size
of the penalty and the applicable rule for rounding penalty increases.
Table 1: The Coast Guard Can Readjust Nearly Half of the Civil
Penalties That Were Initially Adjusted in 1997:
Penalty: $22;
Number of penalties at this penalty amount that were adjusted in 1997:
1;
Percentage of increase in inflation needed to trigger another
adjustment: 22.8;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: $55;
Number of penalties at this penalty amount that were adjusted in 1997:
2;
Percentage of increase in inflation needed to trigger another
adjustment: 22.8;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: Yes.
Penalty: 110;
Number of penalties at this penalty amount that were adjusted in 1997:
9;
Percentage of increase in inflation needed to trigger another
adjustment: 45.5;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 185;
Number of penalties at this penalty amount that were adjusted in 1997:
1;
Percentage of increase in inflation needed to trigger another
adjustment: 27.1;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 220;
Number of penalties at this penalty amount that were adjusted in 1997:
7;
Percentage of increase in inflation needed to trigger another
adjustment: 22.8;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 550;
Number of penalties at this penalty amount that were adjusted in 1997:
15;
Percentage of increase in inflation needed to trigger another
adjustment: 9.1;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: Yes.
Penalty: 1,100;
Number of penalties at this penalty amount that were adjusted in 1997:
18;
Percentage of increase in inflation needed to trigger another
adjustment: 45.5;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 2,200;
Number of penalties at this penalty amount that were adjusted in 1997:
2;
Percentage of increase in inflation needed to trigger another
adjustment: 22.8;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 3,300;
Number of penalties at this penalty amount that were adjusted in 1997:
1;
Percentage of increase in inflation needed to trigger another
adjustment: 15.2;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 5,500;
Number of penalties at this penalty amount that were adjusted in 1997:
22;
Percentage of increase in inflation needed to trigger another
adjustment: 9.1;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: Yes.
Penalty: 11,000;
Number of penalties at this penalty amount that were adjusted in 1997:
23;
Percentage of increase in inflation needed to trigger another
adjustment: 22.8;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 22,000;
Number of penalties at this penalty amount that were adjusted in 1997:
4;
Percentage of increase in inflation needed to trigger another
adjustment: 11.4;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: No.
Penalty: 27,500;
Number of penalties at this penalty amount that were adjusted in 1997:
13;
Percentage of increase in inflation needed to trigger another
adjustment: 9.1;
Were penalties at this amount eligible for adjustment in 2001?: No;
Are penalties at this amount eligible for adjustment in 2002?: Yes.
Penalty: 55,000;
Number of penalties at this penalty amount that were adjusted in 1997:
1;
Percentage of increase in inflation needed to trigger another
adjustment: 4.6;
Were penalties at this amount eligible for adjustment in 2001?: Yes;
Are penalties at this amount eligible for adjustment in 2002?: Yes.
Penalty: 110,000;
Number of penalties at this penalty amount that were adjusted in 1997:
1;
Percentage of increase in inflation needed to trigger another
adjustment: 4.6;
Were penalties at this amount eligible for adjustment in 2001?: Yes;
Are penalties at this amount eligible for adjustment in 2002?: Yes.
Penalty: 137,500;
Number of penalties at this penalty amount that were adjusted in 1997:
2;
Percentage of increase in inflation needed to trigger another
adjustment: 3.7;
Were penalties at this amount eligible for adjustment in 2001?: Yes;
Are penalties at this amount eligible for adjustment in 2002?: YEs.
Total;
Number of penalties at this penalty amount that were adjusted in 1997:
122;
Percentage of increase in inflation needed to trigger another
adjustment: [Empty];
Were penalties at this amount eligible for adjustment in 2001?: 4
Eligible;
Are penalties at this amount eligible for adjustment in 2002?: 56
Eligible.
Source: GAO analysis of Coast Guard data.
Note: The penalty that the Coast Guard adjusted to $185 in 1997 was
increased more than the 10 percent permitted by the Inflation
Adjustment Act for first-round adjustments (from $150), and therefore
should have only increased to $165.
[End of table]
By July 2001 (4 years after the first round of adjustments took
effect), the Coast Guard should have examined its civil penalties and
adjusted those eligible under the statute. For those penalties
initially adjusted in 1997, the Coast Guard should have used the
percentage change in the CPI that occurred from June 1997 through June
2000 (about 7.5 percent) to calculate the size of the unrounded
increase. As table 1 shows, 4 of the 122 Coast Guard penalties that
were adjusted in 1997 were eligible for a second adjustment by July
2001. However, as of the date of this letter, the Coast Guard has not
readjusted these penalties.
By January 2002, the Coast Guard could have used the amount of
inflation that occurred from June 1997 through June 2001 (about 11
percent) to determine which of its penalties adjusted in 1997 were
eligible for adjustment under the Inflation Adjustment Act. As table 1
shows, 56 of the 122 penalties adjusted in 1997 were eligible (and are
currently eligible) for a second adjustment. Coast Guard officials told
us during our review that the agency had not yet made a second round of
penalty adjustments because of personnel turnover, staffing reductions,
and reorganizations.
Recommendation for Executive Action:
We recommend that the Secretary of Transportation direct the Commandant
of the Coast Guard to initiate a regulatory action as soon as possible
to adjust eligible civil penalties in a manner consistent with the
requirements of the Inflation Adjustment Act.
Agency Comments and Our Evaluation:
On October 22, 2002, we provided a draft of this report to the
Secretary of Transportation for his review and comment. We did not
receive any formal comments on the draft report from either the
Department of Transportation or the Coast Guard. However, Coast Guard
officials told us that the agency would begin developing new civil
penalty regulations in January 2003.
We are sending copies of this report to the Commandant of the Coast
Guard and to appropriate congressional committees. It will also be
available at no charge on GAO‘s Web site at [hyperlink,
http://www.gao.gov]. If you or your staff have any questions on the
matters discussed in this letter, you may contact Curtis Copeland or me
at (202) 512- 6806. John Tavares was a major contributor to this
report.
Sincerely,
Signed by:
Victor S. Rezendes:
Managing Director:
Strategic Issues:
[End of section]
Footnotes:
[1] The Inflation Adjustment Act is codified at 28 U.S.C. 2461 note.
The 1990 act was amended in 1996 by the Debt Collection Improvement
Act, which added the requirement for agencies to adjust their civil
penalties by regulation (Pub. L. 104-134, Sec. 31001, 110 Stat. 1321-
373).
[2] See 62 Fed. Reg. 16695.
[3] See 62 Fed. Reg. 31339 (June 9, 1997) and 62 Fed. Reg. 35385 (July
1, 1997).
[4] The Coast Guard did not adjust four penalties because, under the
rounding rules, they did not qualify for adjustment: (1) a $2,000
penalty (codified at 46 U.S.C. 3318(j)(1)) that was last set in 1990,
(2) a $3,000 penalty (codified at 14 U.S.C. 645(i)) that was last set
in 1992, (3) a $25,000 penalty (codified at 46 U.S.C. 8906) that was
last set in 1996, and (4) a $1,000 penalty that was set in 1996
(codified at 46 U.S.C. 2115) and that was adjusted in 1998 to $5,000 by
Public Law 105-383. The Coast Guard also did not adjust a $2,500
penalty (codified at 33 U.S.C. 1236(d)) that should have been adjusted
to $2,750. Therefore, it is currently eligible for a 10-percent
increase.
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